The IRS has demonstrated it intends to enforce existing 1099 reporting rules on cryptocurrency exchanges, but it has not followed up by providing clarity regarding those rules.
For instance, trading platforms might have to send 1099-B forms to users who exchange one type of coin for another, but they’re not explicitly required to send the forms the way brokers are for stock trades. Generally, requirements surrounding the 1099-B remain unclear for cryptocurrencies.
The IRS has already forced Coinbase and Gemini to report users on form 1099-K, the same form home-share and ride-share companies use to report transactions with homeowners and drivers. The federal reporting threshold for the 1099-K is currently set at $20,000 and 200 transactions per year.
The 1099-K lacks the cost basis details required to capture the capital gain/loss calculation that would ultimately determine taxable income and tax revenue for the IRS.
If people are transacting in digital currency, it’s important that anyone understands that there’s a tax obligation on their part. Whether they’re paying their taxes or whether they’re day traders– it doesn’t matter. Any time you’re transacting with digital currency, it’s important that people understand there is a tax liability.
Many people are going to be receiving 1099-K forms this year from the exchanges they’ve interacted with. It is important to understand that those forms are likely not going to be accurate. Our team will be able to deliver a more accurate calculation for tax reporting purposes by accurately determining your cost basis and reconciling your transactions across multiple exchanges.
If you searching for CPA firms to assist you with reporting cryptocurrency income and capital gains, contact Camuso CPA. Whether you need tax preparation services, assistance with properly reporting gains and income from virtual currencies on your taxes, cryptocurrency portfolio analysis, or any other service provided by a certified accountant, Camuso CPA can help.
Patrick Camuso, CPA is founder and owner of Camuso CPA, a Charlotte, NC based CPA firm consulting to cryptocurrency investors, miners and business nationwide.